Judge Delays Decision On The SEC-Bank of America (BAC) Settlement
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Yesterday, a federal judge delayed a decision on whether to approve a $33 million settlement of allegations that Bank of America (NYSE: BAC) failed to disclose to investors that Merrill Lynch agreed to pay billions of dollars in bonuses right before the merger closed.
U.S. District Judge Jed S. Rakoff in Manhattan grilled lawyers from the SEC and Bank of America for more than 90 minutes about the pact, in which BAC wouldn't admit or deny wrongdoing, according to the WSJ.
The judge said he needs more information about who was responsible for the alleged wrongdoing, the basis for the settlement and whether a evidentiary hearing should be held to weigh the facts of the case.
"I would be less than candid if I didn't express my continued misgivings about this settlement at this stage," the judge said. "When this settlement first came to me, it seemed to be lacking, for lack of a better word, transparency. I did not know much about the facts from the complaint, I did not know much, or really anything, about the basis of the settlement."
The Journal said that it's rare for a district judge to delay approval of a consent agreement brought by the SEC at this stage, but Rakoff noted judges are expected to give greater scrutiny to cases with great public interest.
Rakoff said the deal as negotiated "would leave uncertain the truth of the very serious allegations made" by the SEC and that he wanted to find out whether any of the money used to pay the settlement "is derived directly or indirectly from the $20 billion" in U.S. government aid Bank of America received after the merger.
The SEC alleged that BAC told investors in proxy documents for the buyout of Merrill Lynch that it agreed it would not give out bonuses or other compensation to executives before the takeover deal was closed without BAC's consent.
According to the SEC, Bank of America had already "contractually authorized" Merrill Lynch to pay up to $5.8 billion in bonuses. Merrill Lynch ultimately paid $3.6 billion in bonuses shortly before the $50 billion merger closed on Jan. 1.
U.S. District Judge Jed S. Rakoff in Manhattan grilled lawyers from the SEC and Bank of America for more than 90 minutes about the pact, in which BAC wouldn't admit or deny wrongdoing, according to the WSJ.
The judge said he needs more information about who was responsible for the alleged wrongdoing, the basis for the settlement and whether a evidentiary hearing should be held to weigh the facts of the case.
"I would be less than candid if I didn't express my continued misgivings about this settlement at this stage," the judge said. "When this settlement first came to me, it seemed to be lacking, for lack of a better word, transparency. I did not know much about the facts from the complaint, I did not know much, or really anything, about the basis of the settlement."
The Journal said that it's rare for a district judge to delay approval of a consent agreement brought by the SEC at this stage, but Rakoff noted judges are expected to give greater scrutiny to cases with great public interest.
Rakoff said the deal as negotiated "would leave uncertain the truth of the very serious allegations made" by the SEC and that he wanted to find out whether any of the money used to pay the settlement "is derived directly or indirectly from the $20 billion" in U.S. government aid Bank of America received after the merger.
The SEC alleged that BAC told investors in proxy documents for the buyout of Merrill Lynch that it agreed it would not give out bonuses or other compensation to executives before the takeover deal was closed without BAC's consent.
According to the SEC, Bank of America had already "contractually authorized" Merrill Lynch to pay up to $5.8 billion in bonuses. Merrill Lynch ultimately paid $3.6 billion in bonuses shortly before the $50 billion merger closed on Jan. 1.
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